Question

Some analysts consider oligopolies to be potentially less efficient than monopoly firms because at least monopoly firms tend to be regulated. Arguments in favor of a more benign view of oligopolies include

Answer 1

Answer - oligopoly can be kept in line by foreign competition, oligopolic industries may promote technological progress, and oligopolic may engage in limit pricing to keep out potential entrants.

Reason - oligopoli is a market competition where number of seller dominate the market at large. oligopolies can successfully threat competition, they restrict output to maximize profits. Some oligopolies have a very less number of firms in competition, allowing them to act more like a monopoly, while other industries have a much more number of firms making it more difficult to determine the best price. Many times the oligopolic firms who are price leaders limit the prices to hinder new entrances, reason being on a higher price a new entrant can survive on a smaller market share and dilute the concentration of competition. However, there are several factors that limit the pricing power of oligopolies, including foreign competition and technological advances.

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